Healthcare is one of the most active industries in the U.S. Americans are living longer, and demand for healthcare services will grow exponentially over the next decade.
Amid this growth is a new challenge for healthcare providers and facility managers: the ongoing need for the latest and greatest equipment.
Healthcare equipment is changing rapidly, and the industry is feeling increased pressure to keep up. From electronic records to patient monitoring systems, updated equipment contributes to more effective care, and improves efficiency for providers and patients alike.
But the cost of healthcare equipment can be daunting. Budgets are stretched, and it’s difficult to plan for the influx of capital that is often required for equipment upgrades.
For that reason, many healthcare providers and facility managers are beginning to seek out financing options that deliver an easy monthly payment with flexible terms so equipment can be upgraded and replaced as needed.
As a healthcare equipment finance specialist with close to 25 years of experience, the Summit Funding team has assembled a few tips on the best way to finance this equipment in 2017:
#1 - Lock in rates now
Interest rates have remained at historic lows for the last several years, but that is changing. The Federal Reserve continues to indicate that steady rate increases are expected this year.
For this reason, healthcare providers and facility managers should work to secure fixed-rate financing now in order to circumvent higher costs later.
By locking in a low rate in early 2017, healthcare providers and managers can ultimately reduce the long-term cost of the equipment they need.
#2 - Get a line of credit
Equipment technology is changing all the time. As it changes, many healthcare machines are becoming smaller and less expensive. While this might sound like good news, it actually makes financing equipment more challenging.
The fact is, financing a large, expensive piece of equipment is fairly straightforward. The value is agreed upon, terms are set based on what is needed, and a payment schedule is created.
While this is very helpful for large equipment such as MRI or CT machines, today’s healthcare professionals also need help when it comes to financing multiple pieces of small equipment, such as mobile workstations, ventilators, blood analyzers, or software.
Rather than financing each smaller piece individually (which would result in extremely high rates and a complex schedule of payments), healthcare providers can secure a line of credit from a private funder. In doing so, the healthcare provider/manager will make a consistent monthly payment at a low interest rate, and will be able to acquire all of the equipment they need throughout the year.
For example, we recently provided a $23 million line of credit to a group of 80 hospitals located all over the country, enabling them to acquire miscellaneous healthcare equipment as needed. By the end of the year, we had financed more than 110 different pieces of medical equipment at the same fixed rate with individual schedules at each location.
#3 - Think outside the box
Financing can be helpful for more than just medical machines.
By thinking outside the box, healthcare professionals can likely identify technology upgrades that will improve their facility operations, and ultimately improve their ability to provide the best care.
In addition, financing can sometimes help facilities to save costs over time.
For example, we recently helped a New York hospital network to finance their phone maintenance. The maintenance contract would have cost the group $33 million, however the company was offering a 10 percent cost reduction if the hospital would pay up front.
The challenge was that most banks would not fund the $30 million up front payment because the agreement had to include a non-appropriation clause, which gives the hospital group the right to walk away from the deal if the funds are not approved by the state each year.
The Summit team was able to provide the funding, ultimately saving the hospital $3 million, while ensuring that their phone maintenance was fully upgraded.
As healthcare providers and facility managers continue to seek out new ways to provide the best care to their patients, many will seek out financing as a smart solution for their equipment and software. Medical professionals who lock in low rates, secure a line of credit, and think outside the box will find themselves poised and ready to accommodate the expansive growth that is anticipated in the healthcare sector over the next decade.
Eric Freeman is Vice President of Summit Funding Group, an Ohio-based company that provides equipment lease and finance solutions. Contact him at firstname.lastname@example.org.
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